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Powerful lobby opposes tool to fight Medicaid fraud

OLYMPIA, Wash. – Washington is likely losing tens of millions of dollars a year in Medicaid fraud. Two state senators – a Democrat and a Republican – want to recover more of that money.

They want to allow Medicaid fraud whistleblowers to file their own lawsuits and collect a monetary reward. But their crusade has run afoul of doctors, hospitals and drug makers.

Washington's Medicaid fraud unit is housed in a highly secure office in Olympia. Dawn Cortez, with the state Attorney General's office, runs the unit. She says some of her fraud cases come from tipsters.

"Receptionists who have information, other doctors who know that a doctor is billing improperly," Cortez says.

But she adds most of the fraud her office investigates is detected by Medicaid itself. It's a $8 billion a year program in Washington. That makes it a top target for fraudsters – from doctors who overbill to major drug makers that pay kickbacks to doctors.

Cash incentive

Last year Cortez's unit recovered more than $20 million for taxpayers. But she says, "Definitely there is more fraud that we could uncover and would be able to go after if we had more tools."

One of those tools Cortez would like to have at her disposal is a monetary incentive for corporate insiders with direct knowledge of big-time Medicaid fraud.

Earlier this year, state senators Karen Keiser and Cheryl Pflug introduced a comprehensive Medicaid fraud bill. Keiser, a Democrat, chairs the Senate Health Care Committee and Pflug, a Republican, co-sponsored the bill.

Among other things, it would have allowed whistleblowers to file a lawsuit in Washington on behalf of themselves and the state. And if successful they could pocket 15 to 30 percent of any funds recovered – from the thousands of dollars into the millions.

"We have to incentivize whistleblowers in my opinion to come forward," Keiser, says. "We're talking about corporate accountants, the CFO of a corporation, very high level insiders."

The opposition

Twenty-eight states already permit these whistleblower lawsuits. In fact, the federal government rewards states that allow them with a 10-percent fraud recovery bonus. But Senator Keiser’s bill this year ran into tough opposition from what she calls the medical industrial complex.

"The pharmaceutical companies, the large networks of hospitals and clinics. Those are ones where we see entrenched protection of the status quo," she says.

Senator Keiser's bill ultimately failed. As it should have says Jonathan Diesenhaus, an attorney who represents the pharmaceutical industry in Medicaid fraud cases. He argues whistleblower lawsuits at the state level are redundant since it's a tool the federal government uses.

"My clients are already being investigated and being caught and Washington shares in the recovery," Diesenhaus says.

Other opponents include Washington's Liability Reform Coalition which works to limit lawsuits. Its members include drug makers and the state medical association representing nearly 10,000 doctors.

Inviting frivolous suits?

Tom Curry, a president of the association, has an unflattering term for paid whistleblowers: "Bounty hunters. Curry warns if individuals are empowered in this way it will lead to frivolous lawsuits.

"And you could envision in a large medical group a dissatisfied employee filing a suit that may not have any merit to it," Curry says. "But the group would still be subject to the expense and time of defending itself."

A 2007 Columbia Law Review article found that many whistleblower lawsuits may indeed be frivolous. But that same article also concluded that health care fraud is so difficult to detect that incentivizing whistleblowers to come forward is a powerful tool for states.

Senators Keiser and Pflug say they will try again next year.

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Copyright 2011 Northwest News Network

Since January 2004, Austin Jenkins has been the Olympia-based political reporter for the Northwest News Network. In that position, Austin covers Northwest politics and public policy as well as the Washington State legislature. You can also see Austin on television as host of TVW's (the C–SPAN of Washington State) Emmy-nominated public affairs program "Inside Olympia." Prior to joining the Northwest News Network, Austin worked as a television reporter in Seattle, Portland and Boise. Austin is a graduate of Garfield High School in Seattle and Connecticut College in New London, Connecticut. Austin’s reporting has been recognized with awards from the Association of Capitol Reporters and Editors, Public Radio News Directors Incorporated and the Society of Professional Journalists.